Correct Answer - Option 2 : SAFEGUARD
The given set of letters: AUDEFGRSA
PSEUDO-GRADE → Cannot be formed (it is an 11 letter word while there are only 9 letters in the given set of letters.)
SAFEGUARD → Can be formed
STAGNATION → Cannot be formed (T, T, I, N, N, and O are not there in the given set of letters.)
GRANDSON → Cannot be formed (N, N, and O are not there in the given set of letters.)
Hence, "SAFEGUARD" can be formed using the letters given in the question.